Commercial mortgage backed securities provide an ownership interest in commercial mortgage loans made by banks, savings & loans, mortgage companies or other financial institutions regarding one or properties or other real estate (e.g., apartment complex, shopping center). It is not unusual for a commercial mortgage loan may be in excess of tens of millions or even hundreds of millions of dollars.
Mortgage backed securities are created when mortgage loans are pooled by issuers of the securities who sell the securities to investors. An investor may purchase a mortgage backed security when the security is first offered or later when the security is sold in a secondary market. Often, a government agency (e.g., Government National Mortgage Association, Federal Home Loan Mortgage Association) or a private institution will pool the mortgage and issued the securities.
For purposes of management of a commercial mortgage loan, reporting to investors, providing services to a borrower, etc., an entity known as a “master servicer” may be engaged. Responsibilities of a master servicer for different mortgage loan accounts may vary according to different servicing and/or pooling agreements and may include one or more of the following: conducting property inspections of properties involved in mortgages to borrowers; working with special servicers to transfer loans that are in default, become non-performing or meet other specific conditions; creating and providing statements and reports (e.g., property reports, periodic reports, supplemental reports) to trustees and other investors; collecting mortgage payments from borrowers, delivering payments to trustees or other investors; advancing late payments due from borrowers to trustees or other investors; maintaining reserve and escrow funds on behalf of trustees and other investors to be paid to borrowers; paying property taxes and monitoring insurance coverage; etc. The master servicer may communicate with borrowers, investors, trustees, and other parties as part of its responsibilities.
A trustee is a type of investor and typically holds mortgage collateral documents, issues securities or certificates of beneficial ownership, passes payments or funds received from the master servicer to certificate holders (e.g., investors), distributes statements and reports received from the master servicer, consults with and perhaps supervises the master servicer in accordance with any servicing or pooling agreement established with the master servicer, and may have the power to appoint a new master servicer. A trustee may hold legal title to any property or other collateral (e.g., mortgages) involved in a commercial mortgage on behalf of other investors.
An investor is an owner of record of a security or certificate that defines or describes beneficial ownership or other rights in a trust managed by a trustee. Thus, a trustee manages the trust on behalf of investors while the investors are the beneficial owners of the trust. A trustee may own the rights to commercial mortgages and receive payments from the master servicer that the master servicer has received from a borrower. An investor may be or include a party actually purchasing a commercial mortgage backed security or a party (e.g., property inspector, accountant, clerk) associated with the investor.
Many companies exist that act as master servicers (e.g., Midland Loan Services, Inc., CapMark Services, ORIX Real Estate Capital Markets, Prudential Asset Resources). In addition, several of these companies operate World Wide Web (“Web”) sites (e.g., www.midlandls.com) that provide information and resources to investors regarding commercial mortgage backed securities. It would be advantageous to provide a method and apparatus that overcame the drawbacks of the prior art. In particular, it would be desirable to provide a method and apparatus of providing services to borrowers involved in commercial mortgages as well as providing more integrated support for both borrowers and investors.